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Evaluating
the reasonableness of compensation paid by charities to their executive officers
is, of course, essential to determine compliance with Internal Revenue Code
section 501(c)(3)’s prohibition against private inurement of net earnings and
to avoid excise taxes under Code section 4958 (in the case of public charities
and section 501(c)(4) entities) and Code Section 4941 (in the case of private
foundations). A helpful resource for evaluating executive compensation
is Charity Navigator’s recently issued annual study of charity CEO pay,
available here. Among the more interesting
findings highlighted in the accompanying press release are these:

Modest raises are the norm since the
recession: Salaries for the CEOs in this
study increased modestly since the recession: just 0.8% from 2008 to 2009 and
1.5% from 2009 to 2010 and 2.5% from 2010 to 2011. These fairly small
increases come after the 4.7% median increase charity CEOs received from 2007
to 2008.

Charity CEOs that aspire to have big
salaries are more likely to succeed if they work at an Educational charity: The data shows that top pay at charities can vary greatly by
mission with the heads of Educational charities earning as much as $90,000 more
than those running Religious charities.

Geography influences the top
executive's salary: CEO salaries at nonprofits reflect
the regional variation in the cost of living. For example, CEOs at
charities in the Northeast ($149,523) and Mid-Atlantic ($147,474), which
include Boston, Washington D.C. and New York, tend to earn higher salaries,
than those in the Mountain West ($108,893) and Midwest ($114,050), which
include Milwaukee, Boise and Salt Lake City.

Notably,
the study concludes by acknowledging “that
the paychecks of some nonprofit executives are outrageously high,” but
confirming “that those receiving excessive pay are in the minority.”